TiO2 Producer Chemours Outlines Transformation Plan amid Challenging Market

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Researched by Industrial Info Resources (Sugar Land, Texas)--The Chemours Company (NYSE:CC) (Wilmington, Delaware) has suffered substantial separation pains since its spinoff last year from E.I. du Pont de Nemours and Company (DuPont) (NYSE:DD) (Wilmington). The nascent titanium dioxide (TiO2) and fluoro-products company reported a significant loss for 2015, citing a drop in sales revenue on flagging pigment prices, as well as high restructuring costs and interest expenses. But executives have high hopes for the future as the chemicals processing company sheds costs and improves earnings. Some of those hopes hinge on Chemours' newly-completed TiO2 plant in Altamira, Mexico.

Chemours, which was spun off from DuPont on July 1, 2015, reported a net loss of $86 million for fourth-quarter 2015. Comparable earnings for fourth-quarter 2014 were $79 million. Sales for the just-ended quarter were $1.36 billion, down 12% from the same quarter a year earlier. For all of 2015, the company reported a net loss of $90 million.

The company is implementing a number of measures as part of a plan to transition into a money making entity. It implemented cost cuts amounting to $100 million in the second-half of 2015. In September, it shut down the Edge Moor TiO2 plant in Delaware as well as a TiO2 line at its plant in New Johnsonville, Tennessee, eliminating 150,000 metric tonnes of annual production. In November, it announced plans to cut 400 job positions, roughly 5% of its employee and contractor base.

Other moves included a deal in February for DuPont to prepay Chemours $190 million for certain goods and services to be delivered over the next 12 to 15 months, and the cancellation of payments by Chemours to DuPont that were part of the separation agreement.

Chemours used the agreement with DuPont to improve its terms with bank creditors, Chief Executive Officer Mark Vergnano said during the company's earnings conference call. The company is also on track to reduce capital expenditures, which totaled $519 million in 2015, executives said. The company is targeting a $350 million reduction in capital expenditures by 2017.

The 200,000 metric-ton-per-year TiO2 plant expansion in Altamira had a total investment value of $500 million. Mechanical completion was reached in December, with the start of commercial production in mid-2016. "As stated previously we will operate the new line at Altamira at its full capacity to take advantage of the cost benefits," Vergnano said. "However we will dial back production at our other sites, to offset the new ... production until customer demand and overall market conditions improve."

Vergnano said he also expects growth in sales of its environmentally friendly Opteon refrigerant for new cars to result in $100 million per years in earnings growth. The increase will stem from new environmental regulations for European vehicles, he explained.

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